The Widening Impact of China’s Publication of IP Cases

I recently had the opportunity at the Fordham IP Conference to discuss the potential impact of the continuing publication of court decisions by China’s courts since 2014, including their wide-ranging impact on legal research, China IP strategies, and trade.  China’s publication of court cases has had a dramatic impact on political science, legal research and IP strategy.  Here is an extended version of my presentation:

A good starting point for understanding these developments is the important paper of Profs. Benjamin Liebman, Margaret Roberts, Rachel Stern, and Alice Wang on the China Judgements Online Database (CJO) entitled Mass Digitization of Chinese Court Decisions: How to Use Text as Data in the Field of Chinese Law (June 13, 2017) (21st Century China Center Research Paper No. 2017-01; Columbia Public Law Research Paper No. 14-55).  This team looked at 20,321 land use administrative court judgments in Henan Province. The authors critical approach to CJO is summarized below:

First, it is critical to take missing cases into account, rather than succumbing to the temptation to treat even a very large sample as an accurate reflection of reality. … Second, viewing millions of court decisions provides an unparalleled wide-angle perspective on courts’ daily activity, and exposes underlying patterns… Scholars must remember that court judgments provide only one, often limited, view of actual practice. Third, a migration toward treating text as data in the field of Chinese law will require a multi-method approach that combines expertise and insights from law, the social sciences, and computer science.

Their article also discusses motivations for transparency (including reducing corruption), and motivations for individual courts to disclose cases. They note as well that an “incentive bias” now exists which includes making judicial decisions available at the end of the calendar quarter before court evaluations (p. 16).

Moving from the use of the CJO to look at legal issues generally to IP, an important recent study on foreign participation in China’s IP system has also recently been-published by Berkeley JSD Candidate Bian Renjun. Her provocatively-entitled articleMany Things You Know About Patent Infringement in China are Wrong  is scheduled to appear in the Berkeley Technology Law Journal. Ms. Bian uses CJO to analyze 1,663 patent infringement judgments decided by local courts in 2014. Her research provides a much-need supplement to the scholarship of Brian Love, Xuan Thao Nguyen, as well as this blog, about foreign “win” rates in the Chinese courts.

Ms. Bian observes that foreigners asserting invention patents are not underrepresented in the courts. The proportion of invention patents granted by SIPO to foreigners was roughly equivalent to the proportion of foreign invention patent cases decided to overall invention patent cases in court (7.16%/6.92%). The gross number of decisions however was only 115 cases. During that year foreign win rates were higher compared to domestic litigants (84.35%/79.84%), as were injunction rates (92.78%/90.05%) and damages (201,620.45 RMB/66,217.93 RMB).  In sum, Ms. Bian provides a more compelling narrative of the probability that foreigners win in patent litigation in China than predecessors such as Brian Love. However, she does not address how to consider issues involving validity in overall success rates, as has been attempted by such databases as Darts IP, nor does she include metrics to assess any differences in the quality of the patents being asserted, for which additional research would be required.

The third article to look at judicial practices in IP, including the IP databases is Max Goldberg’s promising paper Enclave of Ingenuity: The Plan and Promise of the Beijing Intellectual Property Court (May 2017). Mr. Goldberg is a 2017 graduate of Yale College. His paper won an award as the best student paper in East Asian Studies during the year he graduated.

Mr. Goldberg draws from the work of Martin Dimitrov in suggesting that China’s administrative enforcement system is more politically reactive and less independent. He shares the view of this author and others that the Guiding Cases System of the Supreme People’s Court has had limited uptake by the courts, while the precedent system of the Beijing IP court (BJIPC) appears to have been more widely adopted by judges and practitioners of that court in part due to the releative ease of introducing this system into one highly trained court in an affluent city. Mr. Goldberg offers a reply to the concerns of Benjamin Liebman et al. over the large number of “missingness’” in court cases, by noting that while “the phenomenon of sensitive cases’ omission from government databases in China is well documented, lapses of this size are “much more likely the result of a lack of attention and resources than deliberate censorship.” He bases this part on the more comprehensive reporting rate of IP House at 94.25% based on the docketed numbers of cases at the BJIPC, while CJO had only about 50% of the cases from the same period in 2015.

Mr. Goldberg also focuses on specific judicial policy developments, many of which have been little noticed in the West. For example, he notes that “BJIPC opinions are 40-50% shorter than the decisions of more traditional IP tribunals, despite the fact that the BJIPC jurisdiction specifically includes the most technical cases.” He also notes that the court is also interested in soliciting the opinions of third parties, in a manner akin to an amicus brief. Amicus briefs have been advocated for some time by the US-China IP Cooperation Dialogue, with some important experiments, of which this author is a member. Mr. Goldberg also notes that the Beijing IP Court permits dissenting opinions and that the courts have held open “adjudication committee” meetings, which is an important new innovation. Finally, he notes, that the courts are more actively engaged in use of precedent. The court also had an administrative decision revocation rate of administrative decisions of 17% and a withdrawal rate (where complainant withdraws a case before final decision) of only 7%, which suggests the court is acting to reverse administrative decisions and that litigants have enough confidence in the court that they are willing to pursue cases to their final determination.   Many of these innovations were described in an IP House report previously discussed on this blog, but Mr. Goldberg adds a useful gloss to these developments.

Mr. Goldberg’s article is another important indicator of how China is “crossing the rule of law river by feeling the IP stones.”  Importantly, Mr. Goldberg focuses less on whether foreigners’ win and more on whether procedures compatible with an advanced legal system are being put in place.

Adela Hurtado, one of my former students at Fordham law School has also recently written a useful note in the Fordham Intellectual Property Law Journal that, like Mr. Goldberg’s article, looks at the use of judicial and administrative remedies, including criminal procedures, in addressing rampant infringement. Ms. Hurtado believes that reactive, politically motivated administrative enforcement brings few sustainable results. In her view, foreign companies should consider using the civil system, with its relatively high win rates (as reflected in the new databases) and look to models of successful law enforcement campaigns in the United States which provide for more interagency coordination and sustained efforts to address specific problems. She uses data drawn from Walt Disney’s use of civil and administrative campaigns, comparing Disney’s actions in China with its use of civil remedies in the United States to suggest that Chinese IP enforcement campaigns by Disney should similarly return to greater reliance on civil remedies. Ms. Hurtado may be the first author to look at company specific behavior in different markets by using both Chinese and US databases and thereby highlights another future area of inquiry.

There have been several other efforts that look to China’s legal databases as analytical and research tools. Among other recent scholarship, Susan Finder has also recently written an excellent article on the evolving system of precedent in China in the Tsinghua China Law Review. For those individuals and scholars craving analytics, IP House has also begun publishing important analytic studies on trends in the courts. Topics covered include patent and health, motion picture and television industry and analyses of the decisions of the Beijing IP Court.  Another important application of China’s new databases is in development of course materials on China’s IP system.  In this respect, Profs. Merges and Seagull Song’s forthcoming book on Transnational Intellectual Property Law Text and Cases  (April 2018), comparing US, Chinese and European cases in the full range of IP law with a view towards their importance in developing global strategies, is also a promising step towards incorporating Chinese jurisprudence into the global discussions of IP issues.

China’s decisions to make cases more widely available  also has important consequences for trade-related discussions on IP. Approximately 13 years ago, a TRIPS “Article 63.3” transparency request was made by the United States, Japan and Switzerland at the WTO of China. This request demanded “clarifications regarding specific cases of IPR enforcement that China has identified for years 2001 through 2004, and other relevant cases.” The US delegation, of which I was a part, requested the cases to better analyze developments in China’s IP environment since WTO accession and to prepare for a forthcoming dispute. China refused to produce these cases either in the response to the request or during the dispute.  During the ensuring IP enforcement dispute (DS/362), the WTO itself refused to demand that China produce cases relevant to the outcomes of two claims – one involving copyright, and the other involving criminal thresholds. Indeed, rather than make an adverse inference from China’s unwillingness to produce cases, the WTO panel found that the United States failed to make out a prima facie case with respect to a claim that Chinese criminal thresholds failed to satisfy WTO requirements.

With the benefit of hindsight, one could argue that the WTO established a lower standard in DS/362 for analytical research on Chinese case law than China has since established. Additionally, DS/362 may also stand for the proposition that certain cases may be ahead of their time, particularly in light of China’s own commitments to innovation and development of its IP system.  But that is a topic for another blog….

 

Synergies and Contrasts Between The National IP Strategy Action Plan and Fourth Plenum (with contrasting wordclouds)

 

“””NIPS

Here is an unofficial translation of the English language translation of the Action plan of the National IP Strategy (2014 -2020) (NIPS), about which I previously blogged. A wordcloud from this English translation is above – with an obvious focus on “management,” “strengthening,” “promotion” and “enforcement” and some mentioning of the “market.”  As the NIPS was released just weeks after the Fourth Plenum, it make a useful point of contrast on where China is headed on IP, including IP-related rule of law. An annotated version of the Fourth Plenum decision is available here for comparison.   For those with short attention span, or a strong visual orientation a wordcloud of the Fourth Plenum decision is found at the end of this post.  In short, the Fourth Plenum is emphasizing the “market,” “law” and “enforcement.”  The NIPS, however, seems to be all about strengthening the IP system.

The NIPS contains some interesting general goals, particularly in terms of developing IP intensive industries, including developing Chinese patent pools and Chinese cultural industries. promoting IP services, integration of IP into state science and technology plans, and expanding cooperation.   Some sticky issues, such as involving China’s multiple track system of protecting geographical indications will be changed into a unified system of some kind.  The NIPS also calls for a Chinese-type Section 337 remedy, as was originally contemplated in China’s Foreign Trade Law, ie., to “carry out investigations on infringement of Chinese IPR by imported products and other unfair competition acts in import trade.”

Regrettably, the NIPS keeps some of the failed metrics of its first implementation in place.  Patent filings will increase from 4 per 10,000 people in 2013, to 14 per 10,000 in 2020.  This means that SIPO will be receiving in excess of 6 million patent applications per year. In an implicit recognition of the problem I have noted that patent maintenance  is at least as important as patent applications, the NIPS also wants to increase the average maintenance period for invention patents from 5.8  years to 9.0  by 2020.  However this data point doesn’t resolve the problem of low maintenance rates for utility models and designs and it is to be hoped that in all cases, maintenance rates expand due to growth in the market and not due to the kinds of artificial subsidies that already plague China’s patent applications.   Among the market oriented targets, export growth in IP rights is also slated to grow from 1.36 billion USD in 2013 to 8 billion USD in 2020.  Commercialization-related goals reflect the goals of the Third Plenum, to increase IP utilization generally.

Here’s what the NIPS says about the judiciary:

“Strengthen.. the criminal law enforcement and the judicial protection of IP. We will intensify the investigation of IP crime cases and supervise the handling of key cases; persist in the combination of fight and prevention to gradually bring special campaigns onto the track of normalized law enforcement; strengthen the linkup between the administrative law enforcement of IP and criminal justice and intensify the handover of cases of suspected crimes; strengthen the trail of IP-violating criminal cases according to law, intensify the application of pecuniary penalty to deprive infringers of the capability and conditions for committing crimes again; strengthen the civil and administrative trial of IP to create a good innovation environment; provide human, financial and material guarantee and support for the establishment and operation of IP court according to the plan for establishment thereof.”

The NIPS seems to be following the lead of other agencies in judicially-related efforts.  In administrative law, it also supports  the State Council’s effort to promote administrative transparency, including extending it to credit reporting systems:

“We will … solidly push forward the disclosure of information on cases of administrative punishment of IP infringement to deter law violators and, in the meantime, promote standardized, just and civilized law enforcement by enforcers; incorporate the disclosure of case information into the scope of statistical notification of the efforts of cracking down on infringement and counterfeits and strengthen examination; explore the establishment of the credit standard related to IP protection to include acts of mala fide infringement in the social credit evaluation system, disclose the relevant information to credit reporting agencies and raise the social credit level for IP protection.”

However, regarding IPR-related commercial rule of law, one needs to focus a bit more on the Fourth Plenum.  Here are some of the significant judicial reforms that will affect IP:

Reform systems for judicial organs’ personnel and finance management, explore the implementation of separating courts’ and procuratorates’ judicial administrative management affairs and adjudication or procuratorate powers.

The Supreme People’s Court will establish circuit courts, to hearing major administrative and civil cases that cross administrative regions. Explore the establishment of People’s Courts and people’s procuratorates that cross administrative districts and handle cross-regional cases…

Reform systems for court acceptance of cases, change the case filing review system to a case filing registration system, and in cases that should be accepted by the People’s Courts, ensure parties’ procedural rights by requiring filing when there is a case, and requiring acceptance where there is a lawsuit…

Perfect systems for witnesses and experts appearing in court, ensure that courtroom hearings play a decisive role in ascertaining the facts, identifying the evidence, protecting the right of action, and adjudicating impartially.”

More broadly, here’s what the Fourth Plenum says about IP:

“Perfect a property rights system and an intellectual property rights system that encourage innovation, and structures and mechanisms to stimulate the transformation of scientific and technological achievements. Strengthen the construction of a legal system for the market, compile a civil code, … stimulate the free circulation, fair exchange and equal use of commercial products and factors, strengthen and improve macro-level coordination and market supervision according to the law, oppose monopolies, stimulate reasonable competition, safeguard a market order of fair competition. ”

Conclusion: It should come as no surprise that the Fourth Plenum, although more general, may more greatly impact IP-related judicial / legislative issues.  Based on a recent trip to Beijing, I understand that work is already underway to draft IP provisions of a civil code.  The new chief judge of the Supreme People’s Court IP tribunal (Song), the new Chief Judge of the Beijing IP Court (Su), the new Vice President of the SPC with authority over the IP tribunal  (Tao) all have civil law backgrounds.  In addition, consideration is being given to the specialized IP courts having a circuit court type role.  New technology assessors in the IP courts will affect the way that evidence is considered and will likely enhance the independence and professionalism of the courts. 

Will the Fourth Plenum further push China towards a more market-oriented approach to IP?  I personally believe that for the NIPS to work effectively, the decisive factors has to be the market.  Metrics for IP creation are meaningless unless there is utilization of IP.  Hopefully the Fourth Plenum will push the NIPS implementation even further in a market orientation, which is a key factor of the Fourth Plenum, as this wordcloud shows…

Fourthplenum